With 70% of the world volume of mobile money transactions, Africa now shows huge potential with mobile money growth hence an increased focus by the government on taxing the sector.
Cameroon, Uganda, Tanzania, Congo Republic, Zimbabwe, Ivory Coast and Kenya are some of the African countries that are keying into the immense potential of the rising trend of mobile money in the African continent.
One of the ways these African countries are seeking to gain leverage in this rising sector is the introduction of taxes on mobile money operations.
Contrary to the trend of targeting mobile money operations as a cash cow to generate more tax revenue, a new study spearheaded by Sub-Saharan Africa has shown that if this trend of introducing more taxes on mobile money should persist, Africa will be on the verge of plunging more citizens to poverty.
This analysis further points to the argument that the introduction of taxes like e-levies on mobile transactions will in the long run hurt the poorest by raising their cost of living and doing businesses already suffering from the existing harsh economic trend.
The study also pointed out that instead of increasing revenue, an increased tax burden in accessing financial services will only take the continent backward from gains made by the continent over the years in building a society that is built on economic inclusion for all.
Sequel to its economic inclusion possibilities, the report described mobile money as a great enabler, especially for the marginalized like women and rural communities across Africa.
It is important to state that many countries already have fees such as VAT and excise duty on mobile services, making taxes introduced on mobile money an extra tax. This development is also met with the fact that the continent currently suffers high inflation.
GSMA data shows that Sub-Saharan Africa’s mobile money transactions rose by 40% in terms of value in 2021 from the previous year, against the global average of 31%,
Recent Growth of Mobile Money
The success of Safricom; a Kenyan telecoms operator in building M-Pesa a mobile money platform that launched in 2007 with the notion of catering for people without access to formal banking led to the embrace of such a payment system across the continent.
Taxmobile.Online discovered that a study published in the Science journal found that since 200, the increased access to mobile money in Kenya has raised the per capita consumption and lifted 194,000 households – 2% of the total – out of poverty.
The above study further discovered that Consumption in female-headed households increased twice as much as in others with a suggestion that mobile money particularly benefits women.
In 2021 alone, 70% of the $1 trillion transacted globally through mobile money platforms came from sub-Saharan Africa, the data revealed following a record that Sub-Saharan Africa is home to more than half of the world’s nearly 350 million active mobile money accounts.
Countries such as Kenya, Uganda, Ghana, Senegal, Ivory Coast and Cameroon represent countries with the highest acceptance rate of mobile money.
The COVID-19 pandemic also contributes to the accelerated growth of mobile money in Africa as restrictions on movement and wariness of handling cash imposed pushed people to hold on to the possibilities created by mobile money.
Matters Arising in African Countries
Precisely on May 1st 2022, the Ghanaian Authority commenced the collection of a 1.5% e-levy collection on every mobile money transaction. The e-levy is now chargeable on all electronic transactions above GH¢100.00 from anywhere across Ghana.
According to the Ghanaian Authority, the rationale for introducing the e-levy is for the sake of expanding the tax net as much of the West African nation’s economy operates outside the formal sector and less than 10% of the population pays direct taxes.
Similarly, the government of the day submits that an expanded tax net will capture the informal sector, reduce the nation’s ₦50bn debt and increase the nation’s tax-to-GDP ratio.
On the flip side, critics are saying that the levies are hurting millions of small-business owners and other low-income groups, just as the cost of living rises.
As gathered from national reports, grocery stores in Ghana that are heavily reliant on mobile money transactions are one of the worse hits as these small business proprietors have to rethink how they formerly operate, pushing them to carry cash around than just making transactions completely digital and cashless.
Ghana as it stands is the latest in a growing number of African nations to impose a tax on mobile phone-based transactions.
In Tanzania, a mobile money tax was introduced last July which resulted in a peer-to-peer transaction drop by 38% from 30 million to 18 million per month while Malawi had announced a 1% levy in September 2019, but weeks later backtracked due to opposition.
From a rate that ranges from 0.2% up to 12%; countries like Cameroon, Uganda, Tanzania, Congo Republic, Zimbabwe, Ivory Coast and Kenya have all imposed mobile money taxes in the last four years. These countries have implemented such taxes with disregard to opposition from the sector concerned.
Buttressing findings of the report, International organisations such as the IMF, World Bank and the United Nations have also raised concerns over the taxes. Recently, In its March report on Cameroon, the IMF warned that taxing mobile money could be “fiscally inequitable” and hinder the current low level of financial inclusion.
How Mobile Money Works
The technology behind mobile money is sim card based which allows usability across a phone that doesn’t have an internet connectivity feature.
With mobile money, neglected populations accessing formal financial services such as informal workers, smallholder farmers, women, and rural communities are granted access to transacting money digitally.
Mobile money offers the possibility of securely receiving, withdrawing, sending money, paying for bills and getting remittances anywhere across the world. The possibilities of mobile further stretch to accessing loans, savings and insurance products.
